FINANCIAL MARKETS : Stocks Rise, Yields Fall on Economic News

Market Overview

* Good economic news and falling interest rates helped U.S. stocks stage a solid advance Friday. In Mexico City, share prices hit yet another high.

* Bond yields closed lower, after rising in early trading on news of a surge in October retail sales.

* The dollar tumbled against most foreign currencies.

Stocks

News of a better than expected increase in retail sales in October added to recent signs that the economy is improving, and that buoyed stocks, traders said.

The Dow industrials gained 22.08 points to 3,684.51, not far from the all-time high of 3,697.64.

For the week, the Dow rose 41.08 points.

Broader indexes also advanced Friday, and winners topped losers by about 12 to 8 on the New York Stock Exchange, on heavy volume of 326 million shares.

The healthy retail sales report was considered a prelude to a good holiday shopping season and reinforced perceptions that the economic expansion has finally taken hold. That could lead to stronger growth in corporate profits in 1994, which should be bullish for stocks.

Still, analysts said stock buying was restrained somewhat by worries about the chances for passage of the North American Free Trade Agreement. The House will vote Wednesday on NAFTA.

For a second day, however, the Mexico City stock market rallied briskly, indicating strong sentiment there that NAFTA will pass. The Bolsa index rocketed 52.09 points, or 2.5%, to a record 2,108.44.

Among U.S. market highlights:

* Many industrial stocks whose fortunes are tied to the economy’s swings soared anew. Paper and lumber stocks were particularly strong. Temple-Inland zoomed 4 3/8 to 50 1/8, Georgia-Pacific rocketed 3 5/8 to 73 7/8, International Paper gained 1 1/2 to 65 7/8, Stone Container leaped 1 3/8 to 10 1/8 and Westvaco rose 1 3/8 to 34 1/2.

* Among other industrials, Bethlehem Steel added 1/2 to 18, DuPont rose 7/8 to 47 3/8, Dover leaped 1 5/8 to 60 5/8, Owens-Corning gained 2 to 48 3/4 and Phelps Dodge was up 1 3/4 to 45 1/2.

* Many retail issues also were strong, on optimism about consumer spending. Dillard soared 1 7/8 to 39 1/2, Toys R Us leaped 2 1/4 to 42 7/8, Gap gained 1 to 40 and Woolworth added 1 to 22 1/8.

Also, toy maker Lewis Galoob spurted 1 1/4 to 9 7/8 amid speculation that its toys tied to the television program “Biker Mice From Mars� will be big sellers this Christmas.

But consumer electronics retailer Best Buy tumbled 4 7/8 to 49 5/8 after falling 6 1/4 on Thursday. Analysts cited concern about competition and pricing pressure.

* Tobacco stocks continued to rise on news of cigarette price hikes. Philip Morris jumped 2 1/4 to 59, RJR Nabisco gained 1/8 to 7 and UST rose 1 1/2 to 27 1/2.

* In takeover speculation, restaurant chain Checker’s Drive-In rose 7/8 to 14 on rumors that Pepsico may bid for it.

* Among Southand issues, Computer Sciences soared 5 1/8 to 99 1/2, though there were no announcements. Also, IDB Communications eased 1/4 to 45. A huge block of the company’s stock was sold in a secondary offering priced at 45.

Overseas, stocks continued to rebound in the battered Tokyo market, with the 225-share Nikkei average gaining 335.03 points to close at 18,493.55.

In London, the FTSE-100 index eased 0.6 point at 3,099.1. Frankfurt’s DAX average lost 8.32 points to 2,015.01.

Other Markets

Bond yields slumped Friday after an early surge sparked by news of strong October retail sales.

By day’s end, the yield on the Treasury’s 30-year bond fell to 6.15% from 6.20% on Wednesday. The bond market was closed Thursday for Veterans Day.

Analysts said the retail report initially raised concerns that economic growth could aggravate inflation pressures. But the market reversed course after buyers emerged to take advantage of higher yields.

In addition, analysts said many investors took a second look at the retail report and decided that it wasn’t so robust after all.

Elsewhere, the dollar fell as technical factors, concerns over NAFTA and a surging British pound dampened the impact of the gain in retail sales.

The dollar closed in New York at 1.684 German marks, down from 1.692 on Thursday. It also closed at 105.75 Japanese yen, down from 106.43.

Gold fell on the New York Comex to $373.10 an ounce, off $2.70 from Thursday. Silver closed at $4.51, down 4.2 cents.

Light, sweet crude oil for December ended 18 cents lower at $16.72 a barrel on the New York Merc.

Market Roundup, D4